Vitro Files Mexican Court Case to Seek $1.6 Billion From Funds

Dec. 17 (Bloomberg) -- Vitro SAB said it filed a lawsuit in
a Mexican court seeking damages of as much as $1.6 billion from
bondholders including U.S. hedge funds that shunned the
company’s restructuring plan and tried to force it into
involuntary bankruptcy in Mexico.

Under the company’s restructuring, approved by a Mexican
court in February and subsequently rejected by U.S. courts, a
trust holds newly issued bonds and payments for bondholders not
accepting the plan. Vitro, which defaulted on $1.2 billion in
bonds in 2009, will seek to collect damages from the trust
related to efforts by dissident bondholders to put the company
and 17 units into involuntary bankruptcy in Mexico, the company
said in a filing today to the Mexican stock exchange.

The glassmaker also said the U.S. Court of Appeals in New
Orleans lifted temporary restraining orders that suspended
bondholders’ efforts to collect on judgments against Vitro and
its units in the U.S. A three-judge panel of the appeals court
last month affirmed a June ruling by a U.S. bankruptcy judge in
Dallas who refused to enforce Vitro’s restructuring plan,
handing another U.S. legal victory to bondholders including
Aurelius Capital Partners LP and billionaire Paul Singer’s
Elliot Management Corp.

“In view of this decision the company could be facing a
unique situation, since it has two conflicting orders and
therefore two markedly different obligations in both
countries,” Vitro said in the filing. “The debt that could
form the basis for the dissident funds’ collection actions in
the U.S. has been restructured and replaced with new debt in
Mexico. Consequently the company is evaluating the financial
implications of this particular situation.”

Donald Cutler, a spokesman for the bondholders, declined to
comment.

U.S. Courts

Vitro identified the funds from which it would seek damages
as Moneda, Brookville Horizons Fund, Davidson Kempner Distressed
Opportunities Fund and Knighthead Master Fund. The glassmaker
said it would also seek compensation from Elliott and Aurelius
if it determines the various funds “have agreements to share
the costs of actions certain funds took on behalf of the whole
group.”

Vitro is asking for a full panel of judges on the federal
appeals court in New Orleans to reconsider last month’s ruling
against enforcing its bankruptcy plan in the U.S.

On Dec. 4, the bankruptcy court in Dallas ruled that 10
Vitro units should be in bankruptcy involuntarily because they
guaranteed the defaulted bonds. Bankruptcy Judge Harlin Hale
said in his ruling he was convinced partly because Vitro failed
to make several disclosures that were “particularly disturbing
because of previous questionable acts.”

Those acts included the transfer by a Vitro unit of $100
million out of the U.S. when “there was not a single shred of
documentary evidence” to show a “bona fide tax purpose,” Hale
wrote.